Chapter 4: Managing Norway s development co-operation

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1 Chapter 4: Managing Norway s development co-operation Institutional system operation Indicator: The institutional structure is conducive to consistent, quality development co-operation Since 2008, the Ministry of Foreign Affairs and Norad have reformed the management of Norwegian aid. Norad, for example, aligned its working structure with the Government s new thematic priorities. Although Norad is distinct from the Ministry as a technical directorate, the division of responsibilities between the two institutions is not always clear cut, which was also an issue of concern in the last peer review. Norad continues to administer a sizable amount of Norway s grant aid, even though its principal role should be one of quality assurance and knowledge manager. The embassies are fully decentralised, with the flexibility needed to respond to evolving country needs. A strategic, medium-term plan encompassing all activities could further enhance the transparency and accountability of Norway s aid programme at the country level. Norway s aid system is able to deliver on its policy priorities and commitments The majority of Norwegian development co-operation is administered through the Ministry of Foreign Affairs (MFA) and its embassies. The Ministry is responsible for decisions on policy, for setting the strategic direction for Norway s development co-operation, and for overseeing its management and implementation. As discussed in Chapters 1 and 2, Norway s foreign policy and development policy are closely intertwined, and considered a joint policy area (MFA, 2010). The Ministry s two ministers the Minister of Foreign Affairs and the Minister of International Development share management of ODA, although the Development Minister is responsible for the majority (around 70%) of its aid portfolio (MFA, 2013a). 1 However, all policy issues are managed and co-ordinated through whole-of- Ministry mechanisms involving all relevant department officials, enabling the Government to work under a unified vision and deliver an effective aid programme. This integration of development co-operation policy within the Ministry structure reflects and reinforces the centrality of development co-operation within Norway s foreign policy. The Ministry oversees three agencies that also administer Norwegian ODA: Norad, the Norwegian Peace Corps (Fredskorpset or FK Norway) and Norfund, a wholly state-owned development finance institution. In terms of multilateral ODA, both policy and implementation are handled largely within the Ministry itself by the Department for UN, Peace and Humanitarian Affairs. Continuous effort is needed towards distinguishing between MFA s and Norad s different roles The 2008 peer review recommended that Norway clarify and better distinguish the different roles played by the Ministry of Foreign Affairs and its technical directorate, Norad. Since then, the two institutions have reformed the management of aid. Dialogue between them remains effective, both formally and informally, and shared understanding among the staff accounts for the division of responsibilities between the two institutions. Despite these improvements, the extent to which Norad should act as grant manager is reflected in on-going discussions between the Ministry and Norad. More specifically, although Norad s role is one of quality assurance and knowledge 57

2 Chapter 4: Managing Norway s development co-operation manager, it is also mandated to administer grant aid (NOK 3.5 billion in 2011). This responsibility has increased in recent years. For example, Norad has taken on the responsibility of managing additional NGO grant schemes as a result of the reform. 2 Moreover, the short distance between policy and implementation within the Ministry of Foreign Affairs, and sometimes overlap in functions, may result in speed over quality in programme design. Separating policy from implementation responsibilities could improve the efficiency and effectiveness of the overall development co-operation programme. The Ministry is encouraged to study these aspects as it begins work on a follow-up strategy leading up to In a departure from its Strategy 2013 it should also consider setting a timeline to implement the new strategy, and monitoring its progress to ensure transparency and accountability. Norway s aid structure and systems are highly flexible and decentralised Norway has the structure and systems in place to manage efficiently. In order to make aid more predictable and enable both its country teams and partners to plan with more certainty, Norway should consider implementing strategies that use a medium-term spending plan across all development co-operation, and sharing these formally with its partners. This will also enhance the transparency and accountability of Norway s aid programme at the country level. Norway s bilateral aid management is largely decentralised, in line with both its own goals and the Busan commitment. While the Government is responsible for the overall policy and budget allocation to partner countries, once funds are allocated through an appropriation letter (communicating the Government s yearly priorities and requirements to each embassy), the embassies have financial and programming authority, including staffing, channels, instruments, as well as partners to some extent. 3 This gives them the flexibility they need to respond to evolving needs. These appropriation letters are written based on close dialogue between the embassy and Government, providing a solid foundation for annual programming. In the past these allocation letters were based on a three-year strategic plan that included indicative figures and annual plans for each country, but this system was discontinued in As a result, in Guatemala for example, the embassy was unable to develop a strategic, whole-of-government approach to improve synergies and coherence among all of its development efforts OECD Development Co-operation Peer Review NORWAY 2014 OECD 2014

3 Chapter 4: Managing Norway s development co-operation Innovation and behaviour change Indicator: The system supports innovation Norway has managed its reform well. Since the last peer review, both the Ministry of Foreign Affaris and Norad have outlined strategies and reformed measures to respond better to challenges in a more innovative and flexible way. Likewise Norway is willing to test and use innovative approaches to development co-operation. While leadership and the internal system encourage innovation to a certain extent as illustrated by its Tax for Development Initiative, Norway should consider ways to address its capacity constraint by, for example, establishing partnerships with other development actors. Norway has reformed its system to respond better to emerging challenges Norway has managed the reform of its aid system well and, while not without a challenge, it has improved synergies and coherence as a result. Development cooperation remains flexible at both country level and at central level to implement its expanding aid programme. For its part, the Ministry has updated its 2010 organisational structure based on its Strategy 2013 targets and actions. It also initiated that year a process to strengthen capacity and competency over financial controls, including a new Foreign Service Control Unit that reports directly to the Secretary-General, for risk management and preventing the misuse of ODA funds to support its zero tolerance policy. A Grant Management Unit was also created within the Ministry s finance department to better co-ordinate and ensure proper management of grants by the Ministry, Norad, and embassies in compliance with requirements of the new Grant Management Manual. 5 The Ministry of Foreign Affairs has adopted a more flexible working structure for increased focus on global issues that transcend sectors and borders, led by teams specifically formed for tasks or initiatives, and bringing together staff from different departments/sections within the Ministry or other line ministries (e.g. oil, health, environment, trade, and gender) to ensure a whole-of-government approach. Norad launched its Strategy Towards 2015, setting a number of targets and actions to implement to respond better to the changing needs of development co-operation. It followed this with reform to implement the Strategy and realign its working structure with the Government s new thematic priorities. Norad s key objectives were to be fit for purpose, better able to manage for results, and to provide expert advice to the Ministry and the embassies. While the number of departments was streamlined from 11 to 8 to provide better management, a two-tier structure was also introduced, adding 15 new deputy-director posts. Where the Ministry of Foreign Affairs is organised along geographical and thematic lines, Norad is set up according to themes (see Annex D). The reorganisation featured recruitment of additional expert staff to strengthen Norad s technical capacity for quality assurance and creation of a knowledge-based system to inform decision-making. As part of the Strategy 2013, the Ministry was also required to review the tasks 59

4 Chapter 4: Managing Norway s development co-operation assigned to the FK Norway. The FK programme is based on an innovative model involving mutual learning and exchange across institutions and local communities in Norway and developing countries, particularly Africa. In Guatemala, for example, the FK programmes are in line with Norway s priorities in the country and seem to produce good results. Norway could do more to link FK programmes to its key policy priorities, and to build partnerships between Norwegian and developing country institutions that will help create more synergies. Given its expanded focus on communication as discussed above, Norad could also do more with FK Norway to explore ways to better integrate the FK programmes in its communication and development education efforts. Norway is willing to test new ideas and be innovative Since the last peer review, Norway s development policy has taken a new direction as presented in its Climate, Conflict and Capital, toward the idea that developing countries should control their own revenues and economic resources through sound taxation and economic policies. According to Sharing for Prosperity, Norway is now focusing on fair distribution of resources and opportunities in developing countries by using innovative methods and instruments to target democracy, human rights, and transparency, while reducing inequality. Norway views the fight against corruption, tax havens and illicit financial flows out of developing countries as crucial in this context. To this end Norway is sharing its experience and knowledge in managing revenues from non-renewable resources with developing countries through its Tax for Development programme, a new flagship initiative that builds on the model originally developed by its embassy in Zambia (Box 4.1). Norway s willingness to try out new ideas and use innovative approaches to development co-operation is positive. Its main constraint however appears to be capacity. For instance, the Ministry of Finance, the main Norwegian actor for revenue management in the Oil for Development and the Tax for Development programmes, is unable to expand its involvement beyond the current level. Norway could address its capacity constraint by, for example, collaborating with other bilateral and multilateral agencies. 60 OECD Development Co-operation Peer Review NORWAY 2014 OECD 2014

5 Box 4.1 Tax for Development Norway, through its Tax for Development programme, is supporting partner countries in increasing their tax revenues to better finance their own development and reduce poverty. While the Oil for Development looks at petroleum taxation in the context of integrated resource management, Tax for Development considers the taxation of non-renewable resources as an important element in the overall taxation policy and administration. While the perspectives and approaches are different, the main principles are the same so the two programmes complement one another (MFA, 2013b). The programme also reflected a political wish to give higher priority to this area, as well as to see the tax-related work at country level in the context of Norway s global efforts (Norad, 2012). The MFA has overall responsibility over the programme, and the secretariat is located at Norad, serving as focal point for co-ordination, programme development, and quality control. Since its formal launch in 2011, the programme has established co-operation agreements with revenue authorities in three African countries: Mozambique, Tanzania, and Zambia. The programme has four interconnected objectives: i) support to partner countries tax authorities (capacity building); ii) participation in international co-operation efforts related to taxation and capital flight; iii) knowledge generation and dissemination (research); and iv) support to civil society. While it is still early to gauge results, in Zambia where the original tax model was established, in 2008 the Tax for Development programme has helped the government establish a new strategy for mining taxation, including replacing individual, secret development agreements with a general tax system for mining. The changes introduced since then have helped Zambia increase its tax revenues by several hundred million US dollars in 2011 (Norad, 2012). 61

6 Human resources Indicator: The member manages its human resources effectively to respond to field imperatives Norway manages human resources effectively to respond to field imperatives and new ways of working. It has also addressed the staff recruitment and retention challenges identified by the 2008 peer review to a large extent. Norway is investing in staff development. As development co-operation issues only become more complex, it would benefit from a thorough assessment of Chapter 4: Managing Norway s development co-operation whether it has the right mix of staff and appropriate skills to fulfill its ambitions. Norway manages its human resources effectively The Ministry of Foreign Affairs has made progress in staff retention with development expertise in the programme identified by the last peer review. Staffing levels at headquarters and in the field have increased since According to its memorandum, the Ministry employs around 2,400 staff, with 800 based in Oslo, 650 posted abroad, and 950 local country staff (MFA, 2013a). Of the 88 embassies, 30 currently manage bilateral development programmes. 6 In the recent DAC survey on decentralisation, the Ministry reported it had 544 full-time and 11 part-time staff working on development co-operation. Of the 544 full-time staff, 291 were based at headquarters and 253 were stationed in the field (excluding locally-recruited staff). Norad s staff totalled 228 (MFA, 2013a). FK Norway and Norfund employ around 35 and 55 staff, respectively. 7 In delivering the Government s commitment to its 1% ODA/GNI target, there seems to be increasing pressure on staff both in the field and at headquarters to manage growing amounts of aid in more complex ways. Norway could investigate ways to further streamline its procedures, narrow its contributions to fewer countries, and invest more in joint donor work. In addition, Norad staff serve as an important source of expertise for the Norwegian aid programme. In order to keep their knowledge current and relevant, Norad staff need regular rotation to the field. This helps build and maintain a solid knowledge base. According to the figures provided by the Ministry of Foreign Affairs, a total of 44 Norad staff (20% of its total) have been, or will be posted to Norwegian missions abroad in 2013, including three at the level of Ambassador/Head of Mission in Malawi, Tanzania, and Zambia. 8 However, these figures vary from year to year. To foster Norad s ability to provide solid country-and evidence-based advice to the Ministry of Foreign Affairs and the embassies, Norad staff should be encouraged to apply, and continue to be considered, for positions abroad in line with the Ministry s policy on staff rotation. Increasingly engaged in fragile and conflict-affected states, Norway has worked to provide the appropriate incentives to recruit and retain skilled staff for embassies in these states. With new economic incentives, and other benefits such as shorter-term postings 9 and more regular rest and recuperation leave, working in 62 OECD Development Co-operation Peer Review NORWAY 2014 OECD 2014

7 a fragile state is now considered a positive step for career advancement and more prestigious postings. Although the Ministry continues to face the same challenges in recruiting staff with the right skills, it is continuously trying to improve the terms and conditions for these assignments to make them more attractive to staff. Norway is investing in staff development but could do more for locally-recruited staff Since the last peer review, the Ministry of Foreign Affairs has invested additional resources and training to build its own capacity. It has training plans in place for developing its staff and adequate resources for delivering them. The Norwegian Foreign Service Institute is responsible for training and competence building for both the Ministry and Norad staff, especially for the staff departing for missions abroad and those returning from posts abroad. Its training focuses on the individual staff s needs to fulfil his/her functions. The Ministry s generalist staff posted to embassies that manage bilateral development programmes are systematically enrolled in a course on development administration. Depending on their assignments and functions, staff are also trained in other relevant areas directly related to development co-operation, including grant management schemes and financial management, as well as development policy. On-the-job training involving short-term assignments, such as from the Ministry and Norad to embassies, is also available and considered effective in expanding workforce capacity. Norway s development co-operation also depends heavily on locally-engaged personnel who are crucial for providing contextual and sector expertise in its country programmes, as was the case in Guatemala. 10 According to the Ministry, qualified local staff are increasingly recruited by the embassies, both as programme officers and for support roles. The ratio of local to Norwegian staff is estimated to be around 60:40 (in some countries, as high as 70:30). Locally-recruited professional staff are also provided with regional training opportunities, as well as at the Institute in Oslo because an increasing number of them are taking on greater management responsibilities, such as disbursement and reporting of ODA funds. As observed in Guatemala, the local staff do appreciate the training opportunities and access to professional learning networks that are available to them. However, to enable these staff to strengthen their expertise and further develop their careers, Norway could offer greater support to their capacity development to keep them aligned with most current thinking and practices in their specific areas of competency. 63

8 Chapter 4: Managing Norway s development co-operation Notes 1. According to Norway s memorandum, the Minister of Foreign Affairs is in charge of co-operation in the Middle East, Afghanistan and Pakistan as well as humanitarian aid, peace initiatives, human rights, and global health. The Minister of International Development is responsible for ODA to Africa, Asia, and Latin America as well as for support through multilateral organisations, civil society, environment, and sustainable development, natural disasters, private sector development, democracy support, and research and education (MFA, 2013). 2. Norad administers grants for civil society, research and higher education, industrial and commercial financing facilities, and technical assistance (Norad, 2011). The NGO grant scheme for transition financing was added in As observed by the peer review team in Guatemala. 4. In Guatemala, the peer review team found that the embassy s annual work plan did not capture all Norwegian-supported activities in the country; for example, Norfund activities in support of enterprises active in the hydroelectric sector constitute a substantial part of Norwegian aid to Guatemala but were not covered (see Annex C). 5. In addition to the main Grant Management Manual, there are two accompanying manuals: one on management of delegated grant schemes (e.g. delegated to partners) and another on establishing new and revising existing grant schemes. Both of these manuals are currently being revised ( ). 6. These are: Abuja, Accra, Addis Ababa, Al Ram, Amman, Asmara, Bangkok, Beijing, Beirut, Brasilia, Colombo, Dar es Salaam, Dhaka, Guatemala City, Hanoi, Harare, Islamabad, Jakarta, Juba, Kabul, Kampala, Kathmandu, Khartoum, Lilongwe, Luanda, Lusaka, Maputo, Nairobi, New Delhi, and Pretoria. 7. Figures were provided by the Ministry of Foreign Affairs to the peer review team following the visit to Oslo. 8. Ibid. 9. Staff are typically posted to fragile states for 1-2 years, as opposed to regular 4-year posting. 10. In Guatemala, the locally-recruited advisers with solid development expertise were highly valued by the Norwegian embassy staff as a vital source of country knowledge and institutional memory. The advisers themselves were satisfied working within the Norwegian team environment, with their relative job security. 64 OECD Development Co-operation Peer Review NORWAY 2014 OECD 2014

9 Chapter 4: Managing Norway s development co-operation Bibliography Government sources MFA (Ministry of Foreign Affairs) (2010), Strategy 2013, 17 July 2010, MFA, Oslo. MFA (2013a), OECD DAC Peer Review of Norway 2013 Memorandum, 18 February 2013, MFA, Oslo. MFA (2013b), Sharing for Prosperity: Promoting Democracy, Fair Distribution and Growth in Development Policy, Meld. St. 25 ( ) Report to the Storting (White Paper), April 2013, MFA, Oslo. Norad (Norwegian Agency for Development Co-operation) (2012), Tax for Development, Norad Report, October 2012, Norad, Oslo. 65

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11 From: OECD Development Co-operation Peer Reviews: Norway 2013 Access the complete publication at: Please cite this chapter as: OECD (2014), Managing Norway's development co-operation, in OECD Development Co-operation Peer Reviews: Norway 2013, OECD Publishing, Paris. DOI: This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at or the Centre français d exploitation du droit de copie (CFC) at contact@cfcopies.com.